Indictment — United States v. Kevin J. Gregory (Central District of California, Document 1)

Summary

An Indictment in United States v. Gregory, CR 2:23-cr-00231-JLS, Document 1, filed May 11, 2023, in the United States District Court for the Central District of California, October 2022 Grand Jury. Counts One through Seventeen are brought under 18 U.S.C. § 287 and are titled False, Fictitious, or Fraudulent Claims. The Grand Jury charges that defendant Gregory presented false claims to the IRS for tax refunds on employment tax returns for the business Elijah Farm, which the indictment says was not entitled to the claimed refunds. A table lists each count with a date, an IRS form and a refund amount, including $2,253,700 in Count Five and $23,877,620 in Count Sixteen. The last page carries a True Bill line for the foreperson.

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          Case 2:23-cr-00231-JLS Document 1 Filed 05/11/23 Page 1 of 6 Page ID #:1



 1

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 3                                                                      5/11/2023
 4                                                                           CD


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 6

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 8                              UNITED STATES DISTRICT COURT

 9                         FOR THE CENTRAL DISTRICT OF CALIFORNIA

10                                October 2022 Grand Jury

11   UNITED STATES OF AMERICA,                   CR   2:23-cr-00231-JLS

12                Plaintiff,                     I N D I C T M E N T

13                v.                             [18 U.S.C. § 287: False,
                                                 Fictitious, or Fraudulent Claims]
14   KEVIN J. GREGORY,

15                Defendant.

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             The Grand Jury charges:
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                                COUNTS ONE THROUGH SEVENTEEN
18
                                  [18 U.S.C. §§ 287, 2(b)]
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     A.      INTRODUCTORY ALLEGATIONS
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             At times relevant to this Indictment:
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             1.    Defendant KEVIN J. GREGORY resided in Los Angeles,
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     California.
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                       The CARES Act and Coronavirus Response Credits
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             2.    The Internal Revenue Service (“IRS”) was an agency of the
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     United States responsible for collecting taxes and administering the
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     Internal Revenue Code.
27

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       Case 2:23-cr-00231-JLS Document 1 Filed 05/11/23 Page 2 of 6 Page ID #:2



 1        3.    The Coronavirus Aid, Relief, and Economic Security Act

 2   (“CARES Act”) authorized an employee retention tax credit that a

 3   small business could use to reduce the employment tax it owed to the

 4   IRS (the “CARES Act credit”), also known as the “employee retention

 5   credit.” To qualify, the business had to have been operational in

 6   2020 and to have experienced (1) at least a partial suspension of the

 7   business’s operations because of a government COVID-19 order (e.g.,

 8   an order limiting commerce, group meetings, or travel) or (2) a
 9   significant decline in profits. The credit equaled a percentage of
10   the wages that the business paid to its employees during the quarter,
11   subject to a maximum amount.
12        4.    The Families First Coronavirus Response Act (“Coronavirus
13   Response Act”) and its amendments authorized the IRS to give a credit
14   against employment taxes to reimburse businesses for the wages paid
15   to employees who were on sick or family leave and could not work
16   because of COVID-19 (the “Coronavirus Response credit”), also known
17   as the “paid sick and family leave credit.” The credit equaled the
18   wages the business paid to employees during the sick or family leave,
19   subject to a maximum amount.
20        5.    The taxpayer could request both the CARES Act credit and
21   the Coronavirus Response credit on the IRS Form 941, also known as
22   the federal quarterly employer tax return, and was required to
23   truthfully state, among other things, the number of employees and
24   business’s quarterly wages. Both credits could generate refunds, and
25   the taxpayer could request that the IRS pay the refunds in advance,
26   before the business filed its quarterly employment tax return.
27        6.    Thus, to help alleviate the impact of COVID-19, the CARES
28   Act credit reduced businesses’ employment tax burdens, and the
                                             2
       Case 2:23-cr-00231-JLS Document 1 Filed 05/11/23 Page 3 of 6 Page ID #:3



 1   Coronavirus Response credit reimbursed businesses for the wages paid

 2   to employees who could not work because of the pandemic.

 3        7.    An IRS Form 941X was an amended federal quarterly employer

 4   tax return.

 5        8.    Federal Tax Deposits (“FTDs”), among other things,

 6   consisted of employment taxes, including taxes that were withheld

 7   from employees’ wages. Certain employers were required to make

 8   periodic FTDs to the IRS, normally on a monthly or semiweekly basis.

 9   On the IRS Form 941, the employer could then deduct the FTDs paid to

10   the IRS for the applicable quarter from the total amount of

11   employment taxes due to the IRS.

12                             Elijah USA Farm Holdings

13        9.    On or about August 28, 2020, defendant GREGORY applied for
14   an employer identification number (“EIN”) on behalf of an entity
15   called KG Enterprises.
16        10.   On or about August 30, 2020, defendant GREGORY registered
17   the business Kevin J. Gregory dba KG Enterprises with the City of Los
18   Angeles Office of Finance (“LA Finance”), describing the business
19   purpose as “farming and transportation.”
20        11.   On or about March 15, 2021, defendant GREGORY filed a
21   business tax renewal form with LA Finance on which he updated KG
22   Enterprises’s dba to Elijah Farm.
23        12.   In or about April 2021, defendant GREGORY submitted a
24   filing with the IRS to update KG Enterprises’s dba to Elijah USA Farm
25   Holdings (“Elijah Farm”).
26        13.   For tax years 2020 through 2022, Elijah Farm had no
27   substantial business operations or employees other than defendant
28   GREGORY and did not pay substantial FTDs to the IRS.
                                             3
          Case 2:23-cr-00231-JLS Document 1 Filed 05/11/23 Page 4 of 6 Page ID #:4



 1   B.      THE FALSE CLAIMS

 2           14.   On or about the dates listed below, in Los Angeles County,

 3   within the Central District of California, and elsewhere, defendant

 4   GREGORY made and presented, and willfully caused to be made and

 5   presented, to the IRS, which is part of the United States Department

 6   of the Treasury, false, fictitious, and fraudulent claims, as listed

 7   below, against the United States for the payment of tax refunds,

 8   which claims defendant GREGORY then knew to be false, fictitious, and

 9   fraudulent in that the business named on the submitted employment tax

10   returns, Elijah Farm, was not entitled to the claimed refunds as

11   reported on those returns:

12   COUNT          DATE        CLAIM
13
     ONE            11/2/20     The submission of an IRS Form 941 claiming a
14                              federal tax refund of $1,961.
15

16   TWO            11/4/20     The submission of an IRS Form 7200 claiming a
                                federal tax refund of $21,465.40.
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18   THREE          1/9/21      The submission of an IRS Form 941 claiming a
                                federal tax refund of $7,533.55.
19

20   FOUR           1/28/21     The submission of an IRS Form 941 claiming a
                                federal tax refund of $79,831.96.
21

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     FIVE           4/17/21     The submission of an IRS Form 941 claiming a
23                              federal tax refund of $2,253,700.

24
     SIX            5/24/21     The submission of an IRS Form 941X claiming a
25                              federal tax refund of $280,708.07.
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     SEVEN          5/24/21     The submission of an IRS Form 941X claiming a
27                              federal tax refund of $279,840.07.
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                                                4
          Case 2:23-cr-00231-JLS Document 1 Filed 05/11/23 Page 5 of 6 Page ID #:5



 1   COUNT          DATE        CLAIM
 2
     EIGHT          5/24/21     The submission of an IRS Form 941X claiming a
 3                              federal tax refund of $526,934.50.
 4

 5   NINE           6/11/21     The submission of an IRS Form 941X claiming a
                                federal tax refund of $414,274.
 6

 7   TEN            7/12/21     The submission of an IRS Form 941 claiming a
                                federal tax refund of $9,474,690.36.
 8

 9   ELEVEN         8/13/21     The submission of an IRS Form 941X claiming a
                                federal tax refund of $505,853.57.
10

11
     TWELVE         8/13/21     The submission of an IRS Form 941X claiming a
12                              federal tax refund of $819,756.10.

13
     THIRTEEN       10/4/21     The submission of an IRS Form 941 claiming a
14                              federal tax refund of $13,428,314.24.
15
     FOURTEEN       10/14/21    The submission of an IRS Form 941X claiming a
16                              federal tax refund of $2,920,062.
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     FIFTEEN        11/10/21    The submission of an IRS Form 941X claiming a
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                                federal tax refund of $1,155,705.
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20   SIXTEEN        1/9/22      The submission of an IRS Form 941 claiming a
                                federal tax refund of $23,877,620.
21

22   //
23   //
24   //
25

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                                                5
      Case 2:23-cr-00231-JLS Document 1 Filed 05/11/23 Page 6 of 6 Page ID #:6



 1   COUNT      DATE        CLAIM
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     SEVENTEEN 4/24/22      The submission of an IRS Form 941 claiming a
 3                          federal tax refund of $9,243,348.
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                                                A TRUE BILL
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                                                   /S/
 8                                              Foreperson

 9
     E. MARTIN ESTRADA
10   United States Attorney

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     MACK E. JENKINS
13   Assistant United States Attorney
     Chief, Criminal Division
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     RANEE A. KATZENSTEIN
15   Assistant United States Attorney
     Chief, Major Frauds Section
16
     KRISTEN A. WILLIAMS
17   Assistant United States Attorney
     Deputy Chief, Major Frauds Section
18
     GREGORY D. BERNSTEIN
19   VALERIE L. MAKAREWICZ
     Assistant United States Attorneys
20   Major Frauds Section

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